Precious Metals Fraud - The Close

On another page within this site, we provided information as to what a typical precious metals sales script looks like. As we indicated, the further into the sales script that the fraudsters gets, he or she will get a feel as to what direction to take you so that they can close the deal. In other words, they will tell you exactly what you want to hear. This conversation is not recorded by the precious metals firm.

Once the caller has convinced you to make a purchase, he or she will transfer you to the "compliance" department of the firm to verify the transaction, which call is recorded by the firm. In or view, the main reason for this is to get you to verify that you were not pressured into making the investment. In effect, the firm is asking you to verify that the high pressure sales tactics that were just used with you never happened.

Typically, the "close" will go something like this:

Hello (customer name), this is (your name), I am in the compliance office of(firm name). I would like you to know that this call is to verify your trade and ask you some required questions, and that it is being electronically recorded. Is that all right with you?

It's (date) at approximately (time of day) eastern time.

Now (customer name), our records indicate that you placed an order to purchase (or sell) (#of ounces) of (commodity) at a price of approximately (current price per ounce), which would represent a total metal value of approximately (total metal value).

Is that the order you placed to purchase (or sell)?

You do understand that the (clearing firm name) is financing up to 80% of the total metal value and charging you up to 6 1/2% above the prime rate.

You also understand that the funds that you are sending in this investment included our administrative fee of 15% of the total metal value and a $200 account opening fee for (the clearing firm).

I would like to confirm that (the clearing firm's) equity requirements have been explained to you, and that if your equity position with them should fall below 10% an equity call is triggered and you would be required to bring your equity position back up to 15%. Is that understood? I would also like to confirm that you understand this is the purchase of physical (or spot) metal, not futures or options and you may receive physical delivery of the metal if you pay the loan balance in full. I would also like to confirm that you understand investing in precious metal always entails risk factors, that no one guaranteed that you would make a profit, and that were not pressured into making this investment. Is that correct?

Good! Then we will go ahead and execute your trade now. Okay?

Now that you can read and consider the "closing" affirmation that you must make, it should be fairly clear what a bad idea it is for anyone to purchase precious metals on margin.

Note: Nowhere in the "close" does the precious metal firm employee quantify the actual dollar amounts that the customer will pay in commissions, margin interest to be charged either daily or monthly on the financed portion of the purchase and other dollar amount of fees and charges. If these charges were disclosed in dollar amounts, the investor would think twice about dealing with the firm. By way of example, we are now looking at a precious metals firm where the disclosed and undisclosed charges 45% of the money invested.

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